Yielding Wealth | Personal Finance

Powerball Winnings? What Would YOU Do?

by miranda on August 27th, 2007

The big news over the weekend is that someone somewhere in Indiana has won a hefty Powerball jackpot. Of course, the next big question becomes: What to do with all of that cash?

There are two main options: take a lump sum, or take an annual payout. Many people actually go for the lump sum; few consider the annual payout. But as Kelly the Tax Girl points out, taxes take a big toll in that lump sum Powerball payout:

The lump sum option requires the payment of taxes upfront before a pay-out (withholding is required, usually at the highest tax bracket) - therefore the initial amount to invest will be lower than the post-tax annuity investment.

What would I do? I would probably actually go with the annual payout. Lower taxes. Plus, it would allow me to easily max out my retirement contributions each year and I would still be able to invest plenty. I would see what could be done in a down real estate market that looks like it will bounce back. I would find a casualty (or three or four) from the recent stock crash and see about maybe investing. And I would up my investments in biotech fuels and other alternative energy.

And I wouldn’t quit my day job. That’s the beauty of it. I like writing. I get paid for it. And I wouldn’t quit if I won a Powerball payout. So everything I got each year could go into diversified investments from money market bank accounts to a few well-chosen growth stocks (and, of course, I wouldn’t leave out value stocks). And it would make it easy for me to change my investing plan as needed.

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POSTED IN: Investing, Personal Finance, Saving Money